United States District Court, D. Colorado
ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY
JUDGMENT
CHRISTINE M. ARGUELLO UNITED STATES DISTRICT JUDGE.
This
matter is before the Court on Defendant USAA Life Insurance
Company's Motion for Summary Judgment. (Doc. # 74.)
Plaintiff filed a response (Doc. # 82) on June 6, 2018 and
Defendant filed a reply (Doc. # 86) on June 20, 2018. Having
thoroughly reviewed the underlying briefing, pertinent
record, and applicable law, the Court grants Defendant's
Motion for the following reasons.
I.
BACKGROUND
In
2015, Theodore Bobkowski (“Decedent”) applied for
a life insurance policy with Defendant USAA Life Insurance
Company. (Doc. # 74 at 9.) Based on Decedent's answers in
Defendant's application, Defendant agreed to issue him a
$1 million, 20-year term life insurance policy under
Defendant's “Preferred Ultra” risk class,
which is the least expensive risk class that Defendant
offers. (Id.) The policy became effective on
September 21, 2015. (Id.) Decedent unexpectedly died
on October 22, 2016, a little over a year after obtaining the
policy. (Id. at 10.)
Subsequently,
Plaintiff, as the named beneficiary, submitted a claim to
Defendant on the policy. (Doc. # 21 at 2.) However, because
Decedent died within the policy's two-year contestability
period, Defendant requested and obtained from Plaintiff a
HIPAA release in order to review Decedent's medical
records. (Doc. # 74 at 10.) Defendant then analyzed the
records to determine whether Decedent's medical history
was consistent with his responses in Defendant's
application. (Id.)
Defendant
discovered that Decedent's application omitted numerous
details of Decedent's medical history. (Id.) In
particular, Defendant learned for the first time that
Decedent had been diagnosed with Obstructive Sleep Apnea
(OSA) in November 2012 during the first of two sleep study
diagnostics which Decedent had not disclosed in his
application. (Id. at 3, 10.) Under Defendant's
underwriting guidelines, however, an applicant is not
eligible for the Preferred Ultra risk class if the applicant
has been diagnosed with OSA that has not been surgically
resolved. (Id. at 10.)
On
January 10, 2017, Defendant denied Plaintiff's claim and
refused to pay benefits on the grounds that Decedent
materially misrepresented his medical history by failing to
disclose his OSA diagnosis. (Id. at 11.) Thereafter,
Plaintiff brought this suit in state court asserting claims
against Defendant for breach of contract, bad faith breach of
contract, and violation of the Colorado Consumer Protection
Act (“CCPA”). (Doc. # 21 at 2.) Defendant removed
the suit to federal court. (Doc. # 1.) In the instant motion,
Defendant argues that it is entitled to summary judgment
because it was justified in denying Plaintiff's claim on
Decedent's life insurance policy and because there is a
lack of evidence to substantiate Plaintiff's CCPA claim.
II.
ANALYSIS
A.
SUMMARY JUDGMENT STANDARD
Summary
judgment is warranted when “the movant shows that there
is no genuine dispute as to any material fact and the movant
is entitled to judgment as a matter of law.”
Fed.R.Civ.P. 56(a). A fact is “material” if it is
essential to the proper disposition of the claim under the
relevant substantive law. Wright v. Abbot Labs.,
Inc., 259 F.3d 1226, 1231-32 (10th Cir. 2001). A dispute
is “genuine” if the evidence is such that it
might lead a reasonable jury to return a verdict for the
nonmoving party. Allen v. Muskogee, Okl., 118 F.3d
837, 839 (10th Cir. 1997). When reviewing motions for summary
judgment, a court may not resolve issues of credibility, and
must view the evidence in the light most favorable to the
nonmoving party-including all reasonable inferences from that
evidence. Id. However, conclusory statements based
merely on conjecture, speculation, or subjective belief do
not constitute competent summary judgment evidence. Bones
v. Honeywell Int'l, Inc., 366 F.3d 869, 875 (10th
Cir. 2004).
The
moving party bears the initial burden of demonstrating an
absence of a genuine dispute of material fact and entitlement
to judgment as a matter of law. Id. In attempting to
meet this standard, a movant who does not bear the ultimate
burden of persuasion at trial does not need to disprove the
other party's claims; rather, the movant need simply
point the court to a lack of evidence for the other party on
an essential element of that party's claim. Adler v.
Wal-Mart Stores, Inc., 144 F.3d 644, 671 (10th Cir.
1998) (citing Celotex Corp. v. Catrett, 477 U.S.
317, 325 (1986)).
Once
the movant meets its initial burden, the burden then shifts
to the nonmoving party to “set forth specific facts
showing that there is a genuine issue for trial.”
Anderson v. Liberty Lobby Inc., 477 U.S. 242, 256
(1986). The nonmoving party may not simply rest upon its
pleadings to satisfy this burden. Id. Rather, the
nonmoving party must “set forth specific facts that
would be admissible in evidence from which a rational trier
of fact could find for the nonmoving party.”
Adler, 144 F.3d at 671. “To accomplish this,
the facts must be identified by reference to affidavits,
deposition transcripts, or specific exhibits incorporated
therein.” Id. Ultimately, the Court's
inquiry on summary judgment is whether the facts and evidence
identified by the parties present “a sufficient
disagreement to require submission to a jury or whether it is
so one-sided that one party must prevail as a matter of
law.” Anderson, 477 U.S. at 251-52.
B.
APPLICATION
Plaintiff
asserts three claims for relief against Defendant.
Specifically, Plaintiff alleges: Defendant breached the life
insurance contract into which Defendant entered with
Decedent; Defendant's alleged breach of contract was in
bad faith; and Defendant violated the Colorado Consumer
Protection Act (“CCPA”) by engaging in deceptive
trade practices. (Doc. # 12 at 3-5.) Defendant, by contrast,
argues: Defendant's denial of Plaintiff's claim was
proper because Decedent knowingly made material
misrepresentations regarding his health; Defendant's
denial of Plaintiff's claim was justified and thus not in
bad faith; and Plaintiff's CCPA claim fails because
Plaintiff has not met its burden of producing evidence to
substantiate Plaintiff's allegations. (Doc. # 74 at 3.)
The Court will address each of Defendant's arguments in
turn.
1.
Defendant's Denial of Plaintiff's Life Insurance
Claim
Defendant's
denial of Plaintiff's life insurance claim was justified
because the Decedent made material misrepresentations about
his health in his insurance application. Although an insurer
may not cancel a policy to avoid a pre-cancelation loss,
there are circumstances that allow insurers to
“avoid” coverage after-the-fact. See
Hollinger v. Mut. Benefit Life Ins. Co., 560 P.2d
824, 827 (Colo. 1977). In particular, an insurer's
liability may be avoided when the insured concealed a
material fact while completing an insurance application.
Id.; Silver v. Colorado Cas. Ins. Co., 219
P.3d 324, 328 (Colo.App. 2009) cert. denied, No.
09SC309, 2009 WL 3534579 (Colo. Nov. 2, 2009). Specifically,
the insurer must prove:
(1) the applicant made a false statement of fact or concealed
a fact in his application for insurance; (2) the applicant
knowingly made the false statement or knowingly
concealed the fact; (3) the false statement of fact or the
concealed fact materially affected either the
acceptance of the risk or the hazard assumed by the insurer;
(4) the insurer was ignorant of the false statement of fact
or concealment of fact and is not chargeable with knowledge
of the fact; (5) the insurer relied, to its detriment, on the
false statement of fact or concealment of fact in issuing the
policy.
Hollinger, 560 P.2d at 827 (emphasis added)
(footnote omitted).[1] However, an insurer's contractual
obligations cannot be avoided if the insured's
misrepresentation resulted from an ambiguous question on an
insurance application. Id. at 824.
Here,
Defendant establishes that it detrimentally relied on
material misrepresentations Decedent knowingly made on his
insurance application. However, Plaintiff fails to establish
that Decedent's misrepresentations were due to an
ambiguous question on Defendant's insurance application.
Therefore, there is no genuine dispute of fact and Defendant
is entitled to summary judgment.
a.
Decedent concealed facts in his insurance application
It is
undisputed that Decedent was diagnosed with a medical
condition known as Obstructive Sleep Apnea
(“OSA”) in 2012. (Doc. # 74 at 3.) OSA is
“a condition whereby people typically snore, [and] have
some pausing or cessation of their breathing at night.”
(Doc. # 74-14 at 25.) It is also undisputed that Decedent
sought medical care for his OSA on multiple occasions.
Specifically:
• Decedent underwent a sleep study in November 2012
which is a diagnostic test designed to detect disorders such
as OSA (Doc. # 74 at 3) (the results of the study indicated
that Decedent had moderate OSA);
• Decedent treated his OSA with a Continuous Positive
Airway Pressure (“CPAP”) machine, which is a mask
placed over the nose and mouth that forces air into the lungs
(id. at 2);
• Decedent underwent a second sleep study in January
2013 to determine the amount of pressure from the CPAP
machine that was necessary to prevent his airways from
becoming obstructed during sleep (id. at 4);
• Decedent consulted a doctor regarding his sleep
studies in ...